Saks Global has bolstered its finances, securing $600 million in financing commitments from a majority of its existing bondholders, the luxury retailer said Friday.
The new financing should help ease concerns among bondholders and vendors that Saks Global would not have the wherewithal to sustain its operations — although the company is working with a heavy debt load as it seeks to push through a major reset in its business model.
Saks has a $120 million interest payment due on Monday on its senior secured bonds — the first interest payment on the $2.2 billion in bonds issued just before Saks bought Neiman Marcus Group in December at a $2.7 billion enterprise value.
The transaction detailed on Friday includes a $400 million first-in, last-out (FILO) asset-based credit facility, with $300 million funded right away and an additional $100 million to be funded upon completion of a bond exchange. The FILO loans are repaid to the lender only after the other more senior debt is paid off. The transaction also includes $200 million in additional commitments subject to certain conditions. A majority of bondholders have committed to participate in the exchange, which will launch shortly.
Marc Metrick, chief executive officer of Saks Global, said in a statement: “Today’s announcement reflects the outcome of productive engagement with our bondholders and their continued confidence in our business and strategic direction. This comprehensive financing package meaningfully enhances our liquidity and strengthens our balance sheet. Coupled with the early realization of synergies and improving inventory position, we are primed to execute on our transformation strategy, invest in key growth initiatives, and reinforce our leadership as the world’s largest multi-brand luxury retailer.”
Marc Metrick
Saks said it would be entering into this transaction in lieu of the financing commitments it announced last month with SLR Credit Solutions. Previously, the company said it secured $350 million of financing commitments from SLR, consisting of a $300 million FILO facility.
PJT Partners and BofA Securities Inc. are serving as financial advisors to Saks Global in connection with the transaction while Willkie Farr & Gallagher and Kirkland & Ellis are serving as legal counsel.
Just last week, Saks Global moved to further integrate its operations, widening the role of Emily Essner, president and chief commercial officer, and promoting Mary McGreevy to chief stores officer for Saks Fifth Avenue and Neiman Marcus. The company has been integrating the Saks Fifth Avenue and Neiman Marcus store teams into one central commercial organization. Bergdorf Goodman remains separate.
With the change, all customer-facing functions for Saks Fifth Avenue and Neiman Marcus, including brand partnerships and buying, merchandise planning, marketing, digital, commercial analytics and customer insights — and now store experience as well — will be part of the Saks Global commercial organization, led by Essner.
“We are continuing to execute on our integration strategy, and with that, we are creating a more unified approach in how we serve customers,” Metrick said a week ago. “By integrating our store teams into the commercial function, we will be better positioned to capitalize on opportunities to better serve our customers, driving growth for our business and that of our brand partners.” Essner reports to Metrick.
Through the integrations of its operations, Saks Global, while looking to operate more efficiently and respond to trends and customer needs faster, is seeking to cut about $600 million in annual costs. This spring, approximately 550 workers were terminated, cutting 3 percent of Saks Global’s total workforce following reductions made earlier in the year. Another 500 jobs were also eliminated when Saks closed an owned fulfillment center in Tennessee recently. The integrations will help reduce costs. As a result of the integration, Larry Bruce, president of stores for Saks Fifth Avenue and Neiman Marcus, left the company.
Saks Global has begun paying its bills to vendors, many of which were left unpaid for many months, though some are still awaiting payments from orders received this year. Unpaid orders from last year Saks has promised to begin paying in monthly installments beginning in July.